UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2008
Advanced Technologies Group, LTD
(Exact name of registrant as specified in its charter)
Nevada 0-30987 80-0987213
(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification Number)
921 Bergen Avenue, Suite 405, Jersey City, NJ 07306
(Address of principal executive offices) (Zip Code)
32 Broadway, 3rd. Floor, New York, NY 10004
(Former Address) (Zip Code)
201-680-7142
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.0001 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The registrant's gross revenues for its most recent fiscal year were $919,000.
Number of shares outstanding of each of the registrant's classes of common
equity as of January 31, 2008 is 18,268,104. The Company's Common Stock has been
approved for trading on the OTC Bulletin Board system under the trading symbol
"AVGG". There is very limited trading and limited liquidity of these securities
at the date of this Report.
EXPLANATORY NOTE
Advanced Technologies Group, Ltd. on January 29, 2009 is filing this Amendment
No. 2 to its Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission as a result of the receipt by the Company of financial information
regarding its joint venture investment in FX Direct Dealer, LLC. for fiscal year
2008 subsequent to the issuance of the financial statements for the years ended
January 31, 2008 and January 31, 2007.
This new information requires the restatement of the financial statements
previously issued. The restatement affects the previously issued consolidated
balance sheets, consolidated statements of operations, consolidated statement of
cash flows, and the consolidated statement of changes in shareholders equity. A
highlight of the changes to specific accounts and earnings (loss) per share
calculations is as follows:
As Reported As Restated
----------- -----------
Net income (loss) $(160,807) $ (661,489)
Total assets $ 120,160 $2,527,218
Total liabilities $ 30,980 $2,938,720
Shareholders' equity $ 89,180 $ (411,502)
Earnings (loss) per share- basic & fully diluted $ (0.01) $ (0.04)
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FORM 10-KSB/A
JANUARY 31, 2008
ADVANCED TECHNOLOGIES GROUP, LTD.
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS 4
PART I
ITEM 1. Description of Business 4
ITEM 2. Description of Property 15
ITEM 3. Legal Proceedings 16
PART II
ITEM 4. Market for Registrant's Common Equity and Related 16
Stockholder Matters
ITEM 5. Management's Discussion and Analysis of Financial 16
Condition and Results of Operations
ITEM 6. Management's Report on Internal Control Over Financial
Reporting 19
ITEM 7. Financial Statements
ITEM 8. Changes in and Disagreements with Accountants 21
21
PART III
ITEM 9. Directors, Executive Officers, Promoters and
Control Persons
ITEM 10. Executive Compensation 21
ITEM 11. Security Ownership of Certain Beneficial Owners 27
and Management
ITEM 12. Certain Relationships and Related Transactions 27
ITEM 13. Exhibits and Reports on Form 8-K 27
28
Signatures
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Independent Auditor's Report F-1
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FORWARD LOOKING STATEMENTS
Some of the information contained in this Report may constitute forward-looking
statements or statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on current
expectations and projections about future events. The words "estimate", "plan",
"intend", "expect", "anticipate" and similar expressions are intended to
identify forward-looking statements which involve, and are subject to, known and
unknown risks, uncertainties and other factors which could cause the Company's
actual results, financial or operating performance, or achievements to differ
from future results, financial or operating performance, or achievements
expressed or implied by such forward-looking statements. Projections and
assumptions contained and expressed herein were reasonably based on information
available to the Company at the time so furnished and as of the date of this
filing. All such projections and assumptions are subject to significant
uncertainties and contingencies, many of which are beyond the Company's control,
and no assurance can be given that the projections will be realized. Potential
investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
ITEM 1. DESCRIPTION OF BUSINESS
(A) CORPORATE HISTORY
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. In January 2001, the Company purchased 100% of the
issued and outstanding shares of FX3000, Inc. (formerly Oxford Global Network,
Ltd.), a Delaware corporation, the designer of the FX3000 currency trading
software platform. The FX3000 software program is a financial real time quote
and money management platform for use by independent foreign currency traders.
In March 2002, the Company transferred its FX3000 software program to FX Direct
Dealer, LLC a joint venture company that markets the FX3000 software program.
The Company received a 25% interest in the joint venture in return for the
transfer. The remaining 75% of the joint venture is owned by Tradition, N.A., a
subsidiary of Compagnie Financiere Tradition, a major Swiss-based financial
company. The un-depreciated cost of the FX 3000 software at the date of the
transfer was $1,670,485. On December 29, 2006 Tradition NA sold 80% of its 75%
membership interest in joint venture to the Chairman of the Boars of Directors
of Tradition NA, who is now the primary beneficiary. Tradition NA retains 15%
membership interest.
Since March of 2002 the Company ceased all its efforts to directly market the
FX3000 software and redirected its efforts to the acquisition, development and
commercialization of other types of technology intended primarily for the
e-commerce marketplace.
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During October 2001, the Company acquired 100% of the issued and outstanding
common stock of Luxury Lounge Inc. ("Luxury") in exchange for 7,918,565 shares
of its common stock. Luxury, at the time of acquisition, operated an on-line
interactive web site specializing in marketing of jewelry, watches and other
luxury items at a discount to the retail and wholesale consumer. In addition,
Luxury was also in the process of developing several ancillary technologies
designed to provide on-line marketers with analytical information relating to
the effectiveness of their on-line marketing techniques as well as allowing them
to offer additional services to their customers. The Company believes that these
technologies, (known as PromotionStat and Promote4Free) when properly developed,
will have the potential for generating significant revenues and profits for the
Company. The PromotionStat program will allow on-line retailers and advertisers
to verify customers and categorize the patrons of on-line retail stores. Due to
economic conditions, the Company terminated Luxury's on-line marketing
operations and devoted all of its efforts and resources to complete the
development and initiate the commercialization of the PromotionStat and
Promote4Free technologies.
The Company, through its wholly owned subsidiaries, seeks to generate revenue
through its investment in FX Direct Dealer and the PromotionStat e-commerce
advertising screening platform software. To date, limited revenues ($919,000 in
fiscal 2008 compared to $1,306,012 in fiscal 2007) have been generated from the
Company's continuous software development and maintenance of FX Direct Dealer
platform and no revenues have resulted from the PromotionStat e-commerce
software platform during fiscal 2008. Neither the Company nor its predecessor
has been involved in a bankruptcy, receivership or similar proceeding.
(B) BUSINESS OF REGISTRANT
GENERAL
The Company's business centers around the development and/or acquisition of new
technologies that in management's opinion provide a novel or significantly
improved methodology to solve existing problems, meet current demands among
business and which have the potential for commercialization. Initially,
management has elected to concentrate on technologies within the developing
e-commerce marketplace.
I. THE FX3000 SYSTEM
The Company's first venture after its formation was development of the patent
pending, Internet-based FX3000 software platform, a Java-based online foreign
exchange dealing system. This system created an on-line foreign currency
exchange ("Forex") trading service that offers a complete and technologically
superior software platform that allows the retail-level foreign exchange traders
access to 24-hour, commission-free foreign exchange dealing, using inter-bank
liquidity and efficiencies. As mentioned above, in 2002 the Company reached an
agreement with Tradition N.A., a subsidiary of Compagnie Financiere Tradition, a
major international financial institution, to implement FX3000 on a commercial
scale through a joint venture with the Company.
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Under the joint venture agreement, the Company assigned all of the FX3000
technology to the new joint venture company with Tradition NA, which assumed all
administrative, funding and marketing responsibilities of commercializing the
FX3000 system. Management believes that as the joint venture continues to
develop its commercial operations this will be the leading source of revenues
for the Company over the foreseeable future. As such, in order to provide a
better understanding of the potential of this new technology, following is a
brief discussion of the Forex markets and how the FX3000 system operates.
With the advent of Internet communications and related Web technologies, the
Company perceived a growing demand for faster, cheaper and more efficient
foreign currency exchange trade executions. The present Forex market is
estimated to be at $2.5 Trillion in currencies traded every day. Most Forex
trading is done at the wholesale level amongst brokers and major banks via
private or vendor-supplied computer networks. The availability of Internet
technologies is increasing the availability of lower-cost trading opportunities
at the retail level for money managers, sophisticated high net worth traders,
international corporations and small and medium size institutions. Individual
investors are also being drawn to on-line Forex trading in escalating numbers,
further increasing the pool of prospective trading participants.
The Company's FX3000 technology was designed to serve as a gateway to those
inside Inter-bank markets. This technology ensures that all trades are executed
as soon as they are received at openly posted executable prices that closely
match those of the foreign exchange Inter-bank market as they are received and,
in turn, executing them in the Inter-bank markets. This allows individual
traders and investors to receive the benefits of the massive liquidity and tight
quote spreads available in the Inter-bank markets, and allows those markets, in
turn to service this retail sector without having to manage individual retail
accounts.
The Company initially developed its on-line trading environment to include
real-time dealing quotes, charting, technical analysis tools and news, all in
one comprehensive product. FX3000 fully integrates the client, dealer, back
office and System Administrator functions. Platform's features include
high-speed execution of client orders and the ability to monitor in real time
margin availability, net exposure and profit and loss on all open positions.
Following establishment of the joint venture, the Company continued upgrading
the FX3000 system to enable the platform to better fulfill its market mission
and meet the performance criteria established by its joint venture partner.
Commercial operations of the upgraded FX3000 software platform began, on a
limited basis, during calendar year 2003 and have continued to develop and
evolve through 2008.
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II. ADDITIONAL TECHNOLOGIES UNDER DEVELOPMENT
GENERAL
Through the acquisition of Luxury, the Company acquired several new technologies
related to the e-commerce markets which management believes offer an exceptional
commercial opportunity to the Company. Principal among these new technologies
are "PromotionStat" and "Promot4Free". Both of these technologies have been
designed to meet the most basic problems that have resulted in the loss of
confidence in Internet-based advertising of products and services to consumers.
Given the widespread agreement that Internet marketing is, and will continue to
be, a mainstay of how consumers will purchase goods and services in the future,
management believes that a critical need exists and will continue to grow for
methods to improve the success and viability of Internet-based advertising.
PROMOTIONSTAT AND PROMOTE4FREE TECHNOLOGIES
BACKGROUND: THE INTERNET MARKETPLACE
In less than a decade, Internet-based electronic commerce, or e-commerce, has
emerged as the fastest growing factor in the creation of new wealth and overall
economic activity in the United States. Additionally, it seems clear that the
e-commerce phenomenon is well on its way to redefining how the entire world does
business. The trend, say analysts, is not only being driven by the arrival of
new consumer users, but also will be spurred by the increasing confidence shown
by the business sector in Internet-based commerce. Companies in virtually every
market sector and industry must now determine how to develop innovative business
strategies to remain competitive in the digital marketplace. Although it is
still early, one thing does seem certain: those who make the commitment to
integrate e-commerce as a mainstream element in their business practices within
and between companies are the ones most likely to wind up on top.
The advertising market as a whole is characterized by the fact that it is
difficult to measure, evaluate or analyze the results of a specific ads'
effectiveness. For instance the effectiveness of an ad in the newspaper or
magazine is related to the amount of purchases or subscriptions of that
publication which is clearly a poor measurement. The effectiveness of an ad on
television is typically measured by the amount of viewers during a specific
airing of an ad, which is calculated by an independent company who cannot verify
how effective the ad was in producing results for the advertiser. With the
advent of the Internet measuring the effectiveness of ads became somewhat
simpler. A visitor may click on a banner or link of an advertiser and wind up on
their web site. It is sufficient to place a counter on the advertiser's web site
to determine the amount of visitors to that site. It seems simple at first
glance. However, when a site receives a visitor, a company has no way of knowing
whether a visitor was accidentally routed there, found the site through a search
engine or came because of an offer by the advertising company. The increased
number of visitors to a site may be due to a variety of reasons besides
advertising including the possibility that the numbers were inflated by
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technological means. Most importantly, if a company advertises in more than one
location, it is difficult to determine which ad brought more visitors.
Consequently, a company may not be in a position to determine which advertising
strategy is most effective in promoting its products or services.
Because it is very difficult to measure and predict the effectiveness of a
specific ad placement, a company may continue spending a great sum of money on
advertising based on inaccurate data and assumptions. In essence, a company may
be spending money on advertising that does not work, which creates a dilemma.
How can a company figure out how to budget advertising dollars correctly and
allocate money to advertising sources that will lead to profitability when there
is no way to measure advertising effectiveness? Presently, there are two basic
methods to address this issue on the Internet:
1. SERVER LOG FILE ANALYSIS. This type of analysis can be conducted
either online or offline via a company's Internet Service Provider or
by means of software that is installed on the server. However this
information does not allow for a direct tracing or analysis of which
advertising or promotional source brought the product request or sale.
Additionally there is no way to track and analyze purchased
banner/logo impressions placed on other web sites. Basically, this
method does provide a means to determine how many unique visitors
resulted and what these visitors did when they visited the web site.
2. BANNER IMPRESSIONS ANALYSIS. Such analysis typically includes the
amount of impressions, list of web pages showing this impression, date
of the impression, CTR of a particular banner or logo, etc. However,
none of the companies offering this type of analysis follow the
visitor after the click and have no means to determine which product
was of most interest to a particular visitor directed to a web site
from a particular advertising source. If a company had access to such
information it would be able to conduct a marketing research study for
a particular group of visitors. A company would also be able to
determine the efficiency of a particular advertising and promotional
campaign in providing real traffic and interested consumers.
Clearly, existing methodology does not meet the challenge nor provide the
information necessary to structure an effective advertising campaign. It was
within this environment that management turned its attention to developing a new
approach aimed at assisting E-Businesses by helping them become more profitable.
The resulting technology has been carefully structured to provide meaningful
information to a company and foster the biggest "bang for the buck." The result
was development of the PromotionStat technology.
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PROMOTIONSTAT, INC.
The PromotionStat technology is a statistical and analytical traffic-monitoring
tool designed to help marketing executives monitor the effectiveness of every
dollar spent on advertising and promotions as well as utilize a free promotional
tool at a favorable exchange ratio. The PromotionStat system tracks visitors'
pre and post click activities while identifying what visitors came from which
advertisements or links. With PromotionStat's Internet Advertising Rating
System, a web site will be able to identify and rate their advertising sources
and find out which ads are successful. In essence PromotionStat is capable of
reporting and separating visitors from different advertising vehicles and
tracking their behavior once they get there. This type of analysis will allow
companies to allocate their advertising budget appropriately and prevent them
from spending money on ads that are costly and inefficient.
The PromotionStat system is designed to analyze the effectiveness of advertising
and promotional campaigns of web sites. This system keeps track of visitors via
a series of invisible data collectors placed within individual pages of the web
site. An advertiser will be able to identify visitors by the various advertising
companies that directed them to their site as well as keep track of both the
amount of visitors and their level of interest in the advertiser's products or
services. The system calculates the percentage of visitors who looked at the
home page versus those who continued browsing other internal pages. In this way
a company will be able to determine which advertising company is more effective
and whether it is worthwhile to continue utilizing their services.
In addition to finding visitors with high "targetability", the PromotionStat
technology is able to record and analyze detailed information regarding
visitors. This innovative screening system allows web owners to track and
identify the referring source of their visitors, calculate the amount of unique
visitors on a daily basis, describe the nature and dynamics of visitor activity
on a web site and much more. PromotionStat also has a built in mechanism that
can detect artificially inflated traffic, which is unfortunately a common
practice on the Internet as web sites are paying "per click". This will help web
owners eliminate dishonest promoters that employ such tactics.
A WORKING EXAMPLE OF THE BENEFITS OF THE PROMOTIONSTAT SYSTEM
To best understand the usefulness of the PromotionStat system it may be helpful
to track a hypothetical advertising campaign by a company using the Company's
system. Assume that Company A paid for 10,000 banner impressions of its product
banner to SomeAdvertiser.com. According to the contract with
SomeAdvertiser.com., Company A's banner is supposed to be placed on a particular
page with similar products and information. So Company A should expect a
well-targeted audience to visit its online store. In order to determine the
efficiency of its advertising dollars, the PromotionStat system can first
determine whether Company A's banner was in fact shown 10,000 times as promised
and whether it was shown on the requested page.
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The PromotionStat System can also be used by Company A to provide:
* Real traffic on the pages of the ad promoter and compare those numbers
with the numbers promised;
* Efficiency of Company A's banner based on the CTR so that Company A
may make effective modifications to its advertising.
* By utilizing a special filtering feature in the PromotionStat
reporting system, Company A can input the special reference number
assigned SomeAdvertiser.com and receive the actual number of unique
visitors that came from their web page daily.
* Company A can receive detailed information about these visitors
including date and time of their visit, where they came from, who
referred them, their IP number and the geographic region they are
from.
* Company A can receive information regarding which pages were visited,
which product, department or category was of most interest and which
resulted in actual sales for each day of the week broken down by
referral source or tracked on an individual basis.
What is the benefit derived from all of this information provide to Company A?
If visitors do not leave the web site after clicking on the first page this will
confirm that Company A's impressions are well targeted and not inflated
artificially. Further, Company A can use this information to study product
demand for a specific product type, product category or department. This
provides management with a powerful marketing research tool that will allow
Company A to change product offerings to meet market demand. Finally Company A
can conduct a final analysis of the efficiency of the money spent on advertising
and promotions and compare the amount spent on the 10,000 impressions with the
amount of demand or sales generated.
PROMOTE4FREE, INC.
PromotionStat is not limited to providing traffic monitoring tools that measure
advertising effectiveness as it works in conjunction with a free promotional
service called Promote4Free, that will allow e-commerce companies to decrease
their advertising spending and increase market presence simultaneously. One of
the most effective methods of web site promotion is to join a banner exchange
network that provides a web site access to showing its banner in exchange for
showing other members' banners on their web site. Most existing banner exchange
networks have an exchange ratio of 2:1, which means that for every one showing
of a banner the client must show the banner of another member twice. This ratio
is not that effective in bringing traffic as accumulating showings, or "points,"
at this rate, becomes difficult.
Promote4Free is a banner exchange system that is intended to provide a higher
exchange rate of 4:3, allowing for three points to accumulate in the member's
account for every four showings of the banner of another. In addition to a
favorable exchange ratio, Promote4Free provides broad and detailed statistical
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information regarding banner showings and allows members complete control of
their banner campaigns and point distribution. Promote4Free has a built in fraud
protection system that protects members from dishonest practices of other
members. This innovative technology does not presently exist in any other banner
exchange network program on the Internet.
By combining the innovative services offered by PromotionStat with the
advantageous services offered by Promote4Free, management believes that the
Company will become a leader in restoring confidence in Internet advertising and
making advertising online profitable. Promote4Free and PromotionStat are two
innovative software systems that are designed to address an existing basic need
of E-Businesses of today and strive to promote web sites efficiently and
effectively while reducing advertising spending and optimizing financial
rewards.
III. COMPETITION
The market for new, Internet-based technologies is evolving rapidly, and will be
intensely competitive reacting quickly to the accelerating pace of technological
change. The Company faces competition in this market sector from a broad sector
of companies in many diverse fields whose primary focus is to identify problems
and to create new technological solutions for these problems. Further, the
search to acquire new technology developed by other for commercialization is
also an intensely competitive area. In its efforts to acquire new technology the
Company will be competing with many companies in a wide range of industries,
most of whom have greater financial resources than the Company and greater
market recognition.
Although management believes that the Company's current technologies provides a
number of competitive advantages in the markets for which they have been
designed, it must be remembered that many of its competitors have longer
operating histories, a larger customer base, greater brand recognition and
greater financial, technical, marketing and other resources than the Company.
Current and potential competitors also have established or may establish
relationships among themselves or with others in order to increase the services
offered within the same business sectors as the Company.
IV. RISK FACTORS
1. LIMITED OPERATING HISTORY AND RECORD OF EARNINGS. The Company has only a
limited history of operations. The Company has transferred its principal
technology to a joint venture formed with Tradition N.A., a major brokerage and
financial company, in exchange for a 25% interest in the joint venture. The
joint venture has begun to market the FX3000 software system in 2003. The
Company is also developing additional software product aimed at the e-commerce
market, although no assurance can be given as to when these additional
technologies will result in operating revenues to the Company. For fiscal year
2008, the Company realized a net loss of $661,489 (as compared to a net loss of
$618,337 for fiscal 2007). The Company has received no profit sharing revenues
since its investment in the joint venture in March 2002.
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As a development stage enterprise, the Company is subject to all of the risks
inherent in the establishment of a new business, including the absence of a
significant operating history, lack of market recognition and limited banking
and financial relationships. Further, the Company's Auditor has included a
"going concern" footnote in the Company's audited financial statements for
fiscal 2008. See "FINANCIAL STATEMENTS - FOOTNOTE 12."
2. RELIANCE UPON MANAGEMENT. The Company is largely dependent upon the personal
efforts of its current management, the loss of any of which could have a
material adverse effect upon the Company's business and prospects. The Company
does not have key-man life insurance upon the life of any of its officers or
directors. Additionally, as the Company implements its commercial operations, it
will require the services of additional skilled personnel. There can be no
assurance that the Company can attract persons with the requisite skills and
training to meet its future needs or, even if such persons are available, that
they can be hired on terms favorable to the Company.
3. UNCERTAINTY AS TO MANAGEMENT'S ABILITY TO CONTROL COSTS AND EXPENSES. With
respect to the Company's development of its technologies and the implementation
of commercial operations, the Company cannot accurately project or give any
assurance, with respect to management's ability to control the Company's
development and operating costs and/or expenses. Consequently, if management is
not able to adequately control costs and expenses, such operations may not
generate any profit or may result in operating losses.
4. POSSIBLE ADVERSE EFFECT OF REGULATORY CHANGES. At present, none of the
business segments where the Company plans to operate have significant government
regulation that could be expected to adversely affect the commercialization of
the Company's technologies. However, all of the Company's present technology is
related to the Internet and it is possible that the current federal, state or
local laws and regulations which apply to the Internet and which relate to
services the Company plans to offer its customers, may change in the future.
Although it is not possible to predict the extent of any such changes, and
although management is not aware of any pending adverse changes in the
regulations applicable to its planned business operations, it is possible that
future or unforeseen changes may have an adverse impact upon the Company's
ability to continue or expand operations as presently planned.
On December 11, 2007 the US Commodities and Futures Trading Commission (CFTC)
passed the CFTC Reauthorization Act of 2007 (the "Act"). The Act, as proposed,
will impose on Foreign Exchange Dealers (such as FXDD), a minimum net capital
requirement of $20,000,000. Additionally, Foreign Exchange dealers will also be
required to maintain sufficient capital in excess of the minimum net capital in
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order to "cover" firm's daily net open exposure. Furthermore, Foreign Exchange
Dealers will be required to maintain several million dollars in additional
capital over and above the excess required, in order to comply with new CFTC and
NFA requirements. This legislation may have an adverse effect on Company's
profits, as the joint venture will be unable to disburse any profits until it
satisfies the above-mentioned capital requirements.
5. INTELLECTUAL PROPERTY RIGHTS. The Company's success will depend in
significant part on certain methodologies it plans to utilize in connection with
the commercial applications for its newly acquired technology, as well as with
respect to its FX3000 trading system, and on proprietary intellectual property
rights it has and may in the future develop. The Company plans to rely on a
combination of nondisclosure and other contractual arrangements and trade
secrets, copyright, patent and trademark laws to protect its proprietary rights
and the proprietary rights of third parties from whom the Company may licenses
intellectual property. The Company also plans to enter into confidentiality
agreements with its employees and consultants and limits access to, and
distribution of, proprietary information. There can be no assurance that the
steps planned by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
property rights.
6. RELIANCE UPON WEB SITE, NETWORK INFRASTRUCTURE AND TRANSACTION-PROCESSING
SYSTEMS. The satisfactory performance, reliability and availability of the
Company's Internet-based technologies, transaction-processing systems and
network infrastructure are critical to its operating results, as well as to its
ability to attract and retain customers and maintain adequate customer service
levels. Any system interruptions that result in the unavailability of or reduced
performance of the Company's systems would reduce the volume of revenues and the
functionality of the Company's technology. Further, any interruptions in such
service could adversely impact the effectiveness of the Company's technology and
its ability to perform the functions for which they have been designed. This
would seriously harm the Company's business, operating results and financial
conditions. Management expects that there will be a need to periodically upgrade
its system architecture to accommodate increased traffic and processing needs as
the Company's business continues to develop. Management expects this process to
be time consuming and expensive without any assurance that such upgrades will be
successful.
7. DEPENDENCE ON INCREASED USE OF THE INTERNET AND ON THE GROWTH OF ONLINE
COMMERCE. The Company's future revenues depend upon the increased acceptance and
use of the Internet and other online services as a medium of commerce. The
market for Internet services is in an early stage of growth. Rapid growth in the
use of the Internet, the Web and online services is a recent phenomenon. As a
result, acceptance and use may not continue to develop at historical rates and a
sufficiently broad base of customers may not adopt, and/or continue to use, the
Internet and other online services as a medium of commerce.
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8. RISK OF TECHNOLOGICAL OBSOLESCENCE. All industries based upon innovative
technology, such as the Company's planned Internet-based systems, are
characterized by rapid technological advances, evolving industry standards in
computer hardware and software technology, changes in customer requirements and
frequent new developments and technological enhancements. As a result, the
Company's ability to remain competitive will depend in significant part upon its
ability to continually upgrade its systems and service to keep up with such
technological advances and changes in a timely and cost-effective manner in
response to both evolving demands of the marketplace, requirements of applicable
laws and regulations and product/service offerings by its competitors. In
addition, over the longer term, the Company's ability to remain competitive will
depend in significant part upon its ability to develop and introduce, in a
timely and cost-effective manner, enhancements to its basic systems and
products, which incorporate new technological advances that provide an advantage
over its competition. If the Company faces material delays in introducing new
services, products and enhancements, customers may forego the use of the
Company's system and services and use those of competitors.
9. NO DIVIDENDS AND NONE ANTICIPATED. The Company has not paid any dividends
nor, by reason of its contemplated financial requirements, does it anticipate
paying any dividends upon its Common Shares in the foreseeable future. Further,
the Company has existing commitments to pay dividends on its Preferred Shares
which are ongoing and currently in default.
10. ADDITIONAL FINANCING. The Company will require significant additional
capital to complete development of its recently acquired technology,
commercialization of this technology and for general working capital purposes.
To date, such financing has been provided either by loans from the Company's
principal shareholders or through the sale of the Company's securities, or a
combination of both. There can be no assurance that such sources of capital will
prove sufficient in the future. There can be no assurance that any additional
sources of financing will be available in the future or, if available, that it
can be obtained on terms favorable to the Company. Although the existing cash
resources are currently expected to provide sufficient funds through the
upcoming year, the continuation of the Company as a going concern for a period
of longer than the upcoming year is dependent upon the ability of the Company to
obtain the necessary financing to continue operations.
11. LIMITED PUBLIC MARKET FOR SECURITIES. The Registrant's securities are listed
at OTC.BB of NASDAQ under trading symbols "AVGG" but there is very limited
trading and limited liquidity of these securities at the date of this Report.
Although management expects that a more liquid market will develop for its
Common Shares in the future, no assurance can be given that the trading market
that develops will be sustained or that shareholders will be able to sell their
shares.
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12. RISKS OF LOW-PRICED STOCKS; POSSIBLE EFFECT OF "PENNY STOCK" RULES ON
LIQUIDITY FOR THE COMPANY'S SECURITIES. It is likely that if the Company's stock
is eligible to be traded in the future it will be defined as a "penny stock"
under Rule 3a51-1 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934. In general, a "penny stock" includes securities
of companies which are not listed on the principal stock exchanges or the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or National Market System ("NASDAQ NMS") and have a bid price in the market of
less than $5.00; and companies with net tangible assets of less than $2,000,000
($5,000,000 if the issuer has been in continuous operation for less than three
years), or which has recorded revenues of less than $6,000,000 in the last three
years. "Penny stocks" are subject to rule 15g-9, which imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses, or individuals who are
officers or directors of the issuer of the securities). For transactions covered
by Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, this rule may adversely affect the
ability of broker-dealers to sell the Company's stock, and therefore, may
adversely affect the ability of the Company's stockholders to sell stock in the
public market.
13. FORWARD-LOOKING STATEMENTS. This document contains forward-looking
statements. Readers are cautioned that all forward-looking statements involve
risk and uncertainty. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward-looking statements included in this document will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. (See "Forward
Looking Statements", PART I above).
(C) REPORTS TO SECURITY HOLDERS
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that SEC
internet site is http://www.sec.gov.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's office is located at 921 Bergen Avenue, Suite 405, Jersey City, NJ
07306; formerly at 32 Broadway, 3rd Floor, New York, NY10004, and its telephone
15
number is 201-680-7142. The Company occupies these premises that consist of
shared office suites, pursuant to a year toyear lease which includes an
administrative assistant and communication services. The Company currently pays
rent of approximately $1,000 per month pursuant to said lease. See Financial
Statements, Footnote 13, for more detailed information concerning the Company's
obligations under this lease. The premises and contents are fully insured.
At this time, the Company has no policy in terms of investment in real estate
nor does it have any investment in real estate. The Company has no immediate
plans to invest in real estate mortgages.
ITEM 3. LEGAL PROCEEDINGS
A lawsuit in Supreme Court of the State of New York by a former consultant to
the Company alleging that he was entitled to receive certain shares of the
Company's common stock and for other damages was dismissed by the Court in
November 2007.
Apart from the foregoing action, the Company is not a party to any litigation
and to its knowledge, no action, suit or proceedings against it or any officer
or director, in his capacity as such, has been threatened by any person or
entity.
PART II
ITEM 4. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Registrant's securities are listed on OTC.BB of NASDAQ under "AVGG".
There is very limited trading and limited liquidity of these securities at the
date of this Report. No assurance can be given that the trading market that
develops will be sustained or that shareholders will be able to sell their
shares.
(b) There are approximately 275 holders of the common equity of the Company.
(c) There have been no cash dividends declared to date and there are no plans to
do so. There are no restrictions that limit the ability to pay dividends on
common equity other than the dependency on the Company's revenues, earnings and
financial condition.
ITEM 5. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
BACKGROUND
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. In 2000 the Company had begun to generate revenues from
the leasing of the FX3000 software system to independent IB's worldwide. In
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March 2002, the Company transferred its FX3000 system to FX Direct Dealer, LLC,
a joint venture company that will market the FX3000 software. At that time the
Company terminated all existing leases for the FX3000 system. The Company
received a 25% interest in the joint venture company in return for the transfer.
The remaining 75% of the joint venture company is owned by Tradition, N.A., a
subsidiary of Compagnie Financiere Tradition, a major Swiss-based financial
company. On December 29, 2006 Tradition NA sold 80% of its 75% membership
interest in joint venture to the Chairman of the Board of Directors of Tradition
NA, who is now the primary beneficiary. Tradition NA retains 15% membership
interest.
The Company also is the developer of the PromotionStat and Promote4Free software
platforms, which assists on-line advertisers in monitoring their marketing
effectiveness and which is planned to be marketed through the Company's
subsidiaries. The Company believes that these technologies, when properly
developed, will have the potential for generating significant revenues and
profits for the Company.
GENERAL STATEMENT: FACTORS THAT MAY AFFECT FUTURE RESULTS.
With the exception of historical information, the matters discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward looking statements under the 1995 Private Securities
Litigation Reform Act that involve various risks and uncertainties. Typically,
these statements are indicated by words such as "anticipates", "expects",
"believes", "plans", "could", and similar words and phrases. Factors that could
cause the company's actual results to differ materially from management's
projections, forecasts, estimates and expectations include but are not limited
to the following:
* Inability of the company to secure additional financing
* Unexpected economic changes in the United States
* The imposition of new restrictions or regulations by government
agencies that affect the Company's business activities.
To the extent possible, the following discussion will highlight the activities
of the Company's business activities for the fiscal years ended January 31, 2008
and January 31, 2007.
I. RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS.
CONSOLIDATED SALES, GROSS PROFIT, AND NET INCOME:
Total gross revenues for the fiscal year 2008 were $919,000 (compared to
$1,306,012 for fiscal 2007), which consisted of $ 919,000 in revenues realized
from the FX3000 joint venture (compared to $1,306,012 for fiscal 2007) and $-0-
from the on-line use of the PromotionStat software (same for fiscal 2006). After
17
costs of revenues of $591,000 (compared to $793,758 for fiscal 2007) the Company
realized net revenues of $328,000 for fiscal 2008, compared to $512,254 for
fiscal 2007. The decrease in net revenues was due primarily to the decrease in
revenues from the FX3000 joint venture. With its primary efforts now shifting
from FX3000 joint venture, management will now focus on raising adequate funds
to promote and commercialize PromotionStat and Promot4Free technology.
It is important to note that during fiscal 2007 the Company's efforts with
respect to PromotionStat resulted in very limited initial revenues with respect
to this technology. During fiscal 2008 management elected to freeze the
development of that software.
Management's cut its administrative costs, which began during fiscal 2004,
stopped during 2008 with total general and administrative expense for fiscal
2008 increasing to $3,627,891 compared to $1,204,362 for last year, an increase
of $1,423,529 or more than 300%. The main area of increased cost was salaries
and benefits, which increase to $3,160,071 (compared to $319,076 in fiscal
2007). As a result of the loss of software servicing arrangement for the FX3000
software platform, the management's principal focus during the fiscal 2008 was
on establishing of a joint venture with the purpose of further developing and
marketing of the PromotionStat software platform.
After deducting general and administrative costs, the Company experienced a loss
from operations of $3,299,891 for the fiscal 2008, compared to a loss of
$692,108 for last year. This represents an increase in the Company's loss of
$2,677,783 or approximately 400.00% over that experienced in fiscal 2007.
Management attributes this to the accumulation of base salaries of the officers
of the Company.
Net loss for fiscal 2008 was $661,489, or $0.04 per share, compared to a loss of
$618,337, or $.04 per share for last year. In calculating the loss per share,
the Company had to take into account the dividends due the preferred
shareholders at January 31, 2008 and January 31, 2007. At January 31, 2008 and
January 31, 2007, the preferred dividends were in arrears for $-0- for both
years.
II. DISCUSSION OF FINANCIAL CONDITION: LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2008 cash on hand was $67,286 as compared with $262,081 at
January 31, 2007. During fiscal 2007, the Company issued 101,588 shares of
preferred stock and received net proceeds of $287,835. In fiscal years 2007 and
2006, the Company issued 1,271,850 and 1,196,427, respectively, to preferred
shareholders in conjunction with the issuances of the preferred stock. In 2007,
the Company also issued 1,683,252 "loyalty" warrants to the preferred stock
shareholders.
The Company does not expect any material capital expenditures in fiscal year
2008. Although the existing cash resources are currently expected to provide
sufficient funds through the upcoming year, the continuation of the Company as a
18
going concern for a period of longer than the upcoming year is dependent upon
the ability of the Company to obtain the necessary financing to continue
operations.
At January 31, 2008, the Company had working capital of $($2,866,833) compared
to working capital of $145,051 at January 31, 2007. Working capital decreased
mainly as a result of (i) [salaries due to Company's officers?] (ii) termination
of service arrangement between the Company and FXDirectDealer where the Company
provided programming service upgrades to the joint venture on the FX3000
including 24 hour help desk services, (iii) reduced cash on hand due to normal
fluctuations in the use of cash by the Company, and (iv) discontinued
subscriptions to Company's Preferred Stock and substantial increase in legal
fees.
Total assets at January 31, 2008 were $2,527,218 as compared to $367,017 at
January 31, 2007. [ The principal cause of this increase in total assets at
January 31, 2008 was income received in the joint venture of FXDD in accordance
with the K-1 statement. No cash distribution was received as of yet.]
The Company's total stockholders' equity decreased to ($411,502) at January 31,
2008 from $249,987 at January 31, 2007. [Stockholders' equity decreased
principally because of the accumulated salaries to its officers and loss from
operations experienced by the Company.]
The Company issued a stock dividend of 211,431 shares of common stock to the
holders of the preferred stock.
During fiscal 2006, 2007 and 2008, FXDirectDealer LLC, the Company's joint
venture with Tradition NA began to recognize a net profit from operations.
However, due to the loans that Tradition had made to the joint venture during
the initial years when it was developing its business operations, all of the net
profits generated to date have been applied to the partial repayment of these
loans. This fiscal year the balance of the loan was deferred for 3 years and the
loan will become due and payable in 2010. In light of recent CFTC regulation
(mentioned above) FXDD would be unable to disburse any profits from
FXDirectDealer joint venture until minimum capital requirements of the joint
venture are satisfied. Thereafter, management expects that the Company will
begin to receive profit distributions on a quarterly basis as provided for in
the joint venture agreement. However, the Company expects FXDirect Dealer's
management to distribute the amount of profits necessary, in order to cover
Company's Federal Tax liabilities as provided by the Joint Venture Agreement.
ITEM 6. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. internal control over
financial reporting is defined in Rules 13-a-15(f) and 15d-15(f) under the
Exchange Act as a process designed by, or under the supervision of, the
19
Company's principal executive and principal financial officers and effected by
the Company's board of directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles and includes those policies and
procedures that:
* pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
* provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorization of management and directors of the Company; and
* provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over
financial reporting as of January 31, 2008. In making this assessment,
management used the criteria established in "Internal Control-Integrated
Framework," issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
Based on this assessment, management believes that, as of January 31, 2008, the
Company's internal control over financial reporting is effective and in
accordance with Item 308 of Regulation S-B.
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the period
covered by this Annual Report. Based on this evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls
20
and procedures were ineffective as of the end of the period covered by this
Annual Report on Form 10-KSB. The management will correct this failure going
forward.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of the Company are filed as a part of this Annual
Report. Included are the audited statements of Advanced Technologies Group, Ltd.
for the years ending January 31, 2008 and 2007 are submitted herewith on Pages
F-1 to F-13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL MATTERS
There have been no disagreements with the registrants former or present
Accountants on accounting and financial matters.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The Company has three officers and three directors.
The following table sets forth as of the date hereof, with respect to each of
the Company's directors and officers their position and their ages:
Name Age Position
---- --- --------
Alex Stelmak 59 Chief Executive Officer, Chairman of the Board
of Directors & CFO
Stan Mashov 39 Vice President, Chief Technology Officer & Director
Dr. Abel Raskas 67 President, Senior Marketing Director and Director
of the Company; CEO and Director of Luxury Lounge and
its Subsidiaries and Director
|
The directors will serve until the next annual meeting of stockholders and until
their successors are qualified and elected. The officers are also newly
appointed and serve at the will of the Board of Directors. There are no existing
committees of the Board of Directors. There are no family relationships among
the officers and directors of the Company. There are at present no committees of
the Board of Directors.
21
There are no agreements that a director will resign at the request of another
person and the above named Directors are not acting on behalf of nor will act on
behalf of another person.
The following is a brief summary of the Directors and Officers including their
business experiences for the past five years.
ALEX J. STELMAK, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Stelmak founded and has been President and Chief Executive Officer of the
Company since its formation in 1997. He has over twenty years of experience in
operation and management, building highly successful financial services firms.
Mr. Stelmak has served as President of Commonwealth Capital Group, Ltd., a
financial advisory and investment-banking firm that has been engaged as a
consultant to the Company. From 1996 to 1998, he served as the President of
Oxford Holdings - a Registered Commodities Broker/Dealer principally engaged in
providing managed currency-trading programs for Institutional and private
clients. Prior to 1996 Mr. Stelmak also served as a stockbroker with BDS
Securities, Greenway Capital and US Securities, Inc. He holds a Series 7 and 63
licenses from the National Association of Securities Dealers. Mr. Stelmak holds
a BS degree in Business Administration with a major in accounting. He also holds
the U.S. Equivalent of Master Degree in Economics.
STAN MASHOV, VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER
Mr. Mashov founded and has been Vice President and head of information
technology of the Company since its formation in 1997. He has also served in the
same capacity for Oxford since its formation in September 1997. Mr. Mashov has
been mainly responsible for the design, development and implementation of the
FX3000 on-line currency trading software platform. He is also responsible for
FX3000's human and technical resources dedicated to software, technology and
infrastructure development, implementation and business support. During his
tenure with the Company Mr. Mashov assembled a superior team of programmers who,
under his supervision designed, developed and implemented FX3000's assignment
for a new software system to meet trading, risk management and back office
business requirements. He was also instrumental in implementing FX3000's web
site, manual and educational material. Prior to joining the Company, Mr. Mashov
served as Chief Analyst and Currency Trader for Oxford Holdings, a company
principally engaged in providing managed currency trading programs for
individual investors. Mr. Mashov received his Degree in Accounting from Berkeley
College.
DR. ABEL RASKAS, PRESIDENT/SENIOR MARKETING DIRECTOR
Dr. Raskas has served as a director of the Company since 1998. He is also
Founder and President of Luxury Lounge, Inc. - an Internet wholesaler and
retailer of luxury and premium quality goods and services recently acquired by
the Company. Prior to establishing Luxury Lounge, Inc. Dr Raskas served as Vice
President of Trimol Group, Ltd., a Publicly Held company engaged in the business
of producing specialized documents through patented software. As a Principal of
22
Trimol Group, Ltd, Dr. Raskas was instrumental in bringing the Company to the
Public Market. Prior to joining Trimol, from 1991 to 1998, he was a Principal
and Vice President of Ocean Bridge International, Ltd., a company principally
engaged in commercial finance and International trade with Eastern European
countries. From 1980 to 1986 Dr. Raskas was the Founder and Principal of ABDATA
Independence, Inc., a computer service bureau that was acquired in 1986 by
Sandata Corp. Following the sale of ABDATA, Dr. Raskas remained a director of
Marketing for Sandata Corp. until 1991. During this same period Dr. Raskas
managed a data processing school and was one of the founders of CAIS Systems, a
computer advertising information system. From 1966 through 1979 Dr. Raskas was
an independent consultant in the design and implementation of management
information systems ("MIS") to different industries. Dr. Raskas holds the
equivalent of a Doctorate Degree in business management and computer science
from St. Petersburg University (received in 1973). He has authored 20 articles
and one book all in the field of business management and computer science.
BOARD OF ADVISORS
The Company has assembled a Board of Advisors to advise the Board with respect
to specific matters affecting the Company and its business operations. Depending
upon the nature of the advice requested by the Board, they may receive
compensation in specific circumstances as determined by the Board of Directors.
Their recommendations are purely advisory and the Board is not obligated to
follow any recommendations made. Following are profiles for each member of the
Board of Advisors:
DR. ALFRED D. MORGAN, PH.D. SPECIAL FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS
Dr. Alfred D. Morgan joined the Company in November 2000. Mr. Morgan brings to
the Company more than 25 years of versatile and diverse financial experience
with major Public and Private Corporations. He worked for 4 years with Lehman
Bros. as a Securities Analyst, Portfolio Manager and General Corporate Financing
Executive. After that Mr. Morgan accepted a position of Director of Development
with Fairbanks Whitney Corp (NYSE). Subsequently, he joined a NYSE firm
Federman, Stonehill as a Partner directly responsible for major IPO`s (Subaru of
America, Cablevision Systems). At the same time (1980-1983) Mr. Morgan was a
Special Professor of Finance with Hofstra University School of Business. By 1984
he devoted his full time to teaching as Professor of Finance at Southern
Connecticut State University, where he introduced courses in Entrepreneurship
and Security Analysis. At the same time he was involved with managing of
Peachtree Venture Capital Fund and was directly responsible for aiding a number
of growth companies to penetrate Public Markets by Reverse Merger (Transmedia
Network, Resources America, MSH Entertainment). During his distinguished career
in the financial community, Mr. Morgan also held a number of Directorship
positions with major Public and Private Corporations: Magic Marker Pens Co.,
Transmedia, Resources America Oil Co., Columbia Financial Exchange, MSH
Entertainment, etc. Mr. Morgan also enjoys a long lasting working relationship
with a number of financial publications where he frequently publishes his
23
articles including Wharton Journal of Venture Capital, Oxford Journal of
Statistics, Bankers Magazine, US Investor, Nation. Dr: Morgan holds Ph.D. in
Economics from Harvard, Teaching Fellowship, Research Scholarship Oxford
University for Ph.D. Thesis, M.A. Scholarship from University of Wisconsin,
Assistant in Statistics, M.A. Thesis. Non-Degree courses with New York
University in Accounting, Arbitrage, Investment Banking. Honors and
Recognition's: Appointed by U.S Secretary of Commerce to Connecticut State
District Council; Held a Seat on New York Commodities Exchange; Nominated as
Teacher of the Year by Finance Club, Southern Connecticut State Univ. and Univ.
of Georgia; Rhodes Scholar Nominee, Phi Beta Kappa.
ALEXANDER GORLOV, PH.D. CHIEF TECHNOLOGY ADVISOR TO THE BOARD OF DIRECTORS
Professor Alexander M. Gorlov of Northeastern University in Boston is the 2001
recipient of the prestigious ASME Thomas Edison Patent Award for his patented
invention of the Gorlov Helical Turbine. The Edison Patent Award was established
in 1997 in order to recognize the creativity of a patented device or process
that has the potential to significantly enhance some aspects of mechanical
engineering. Professor Gorlov is a Professor Emeritus at Northeastern. During
his rich professional career, Professor Gorlov has established himself as a
major powerhouse in High Technology field. He holds 21 International and US
patents in such fields as Renewable Energy, Structural Analysis & Design,
Theoretical Mechanics as well as the design of Bridges and Tunnels. In
particular, his recent invention "Terrorist Truck-Bomb Protection System" is
certified by 4 US patents and is placed on the US Department of State list of
certified equipment. That allows the system to be used for protection of vital
Government installations such as Nuclear Power Plants, Military Bases around the
World, Embassies, Bridges and Tunnels as well as other potential strategic
targets from terrorist attacks. Professor Gorlov is a recipient of research
grants from the US Dept. Of Energy, Allied Signal Co., New England Power Co. He
is a leading designer of a number of major worldwide construction projects such
as subway systems, hydroelectric power plants, tunnels, bridges etc. Professor
Gorlov is an author of over 90 periodical technical papers and 3 books.
CARL P. RANNO, SPECIAL LEGAL ADVISOR TO THE BOARD OF DIRECTORS
Mr. Ranno currently serves as Chairman and CEO of Spectrum Advisors, LLC, a
company engaged in the business of mergers and acquisitions as well as advisory
functions to its clients. Mr. Ranno is member of numerous boards of directors of
both publicly held and private companies. Apart from his other duties and
business affiliations, Mr. Ranno has been a practicing attorney since 1968 and
currently serves as general counsel to numerous publicly held companies advising
these companies in the areas of general corporate law and, specifically, in the
areas of U.S. securities laws. From 1992 to 1997 Mr. Ranno served as President
and CEO of Pollution Controls International Corp., a publicly traded company
engaged in the manufacture and marketing of automotive after-market products on
24
a global basis. From 1990 to 1992 Mr. Ranno also operated as an independent
Investment Banker associated with Corporate Capital Group and, ultimately,
Ladenburg Thalman in New York. His activities during this period principally
involved the acquisition of companies that supply automotive manufacturers. Mr.
Ranno hold a Bachelor of Science degree in Economics and Chemistry from Xavier
University and a Juris Doctor degree from the University of Michigan School of
Law.
DR. MARK G. KARPOVSKY, PH.D. SPECIAL ADVISOR TO THE BOARD OF DIRECTORS
Dr. Karpovsky has been a full Professor of Electrical and Computer Engineering
of the Boston University, and Director of the Reliable Computing Laboratory
since 1983. He conducts research in the areas of new techniques for design of
reliable multiprocessors, networks of workstations and local area networks,
routing in computer and communications networks, testing, and diagnosis of
computer networks combining on-line and off-line techniques for error detection
and/or location, and fault-tolerant message routing for computer networks. Dr.
Karpovsky teaches graduate courses on interconnection networks, computer
hardware testing, fault-tolerant computing, and error-correcting codes. Dr.
Karpovsky received the B.S., M.S. and Ph.D. degrees in 1961, 1963 and 1967,
respectively. He has been Visiting Professor at the University of Dortmund and
Ecole National Superieure des Telecommunication, Paris. Dr. Karpovsky has been a
consultant for IBM, Digital Corp., Honeywell, and AT&T, and is currently
Director of the Reliable Computing Laboratory. He has published more than 140
papers and several books in the areas of logic design, testing and diagnosis,
fault-tolerant computing and error-correcting codes.
DR. JOSEPH MEDVED, PH.D. SPECIAL ADVISOR TO THE BOARD OF DIRECTORS
Dr. Medved has over 30 years in Data Processing experience, the last 20 years of
which have been in development of database online applications. Dr. Medved
positions included Project Manager, Business Analyst, System Architect and
Database Administrator for major database online projects. For the past 10 years
Dr. Medved has served as business Analyst-Database Administrator for the City
University of New York, with primary duties in Internet application development.
Dr. Medved is currently serving as full Professor of the Computer Science Dept.
of the City University of New York. Dr. Medved served as System Architect for
New York Life Insurance Company, where he was personally responsible for the
entire computer system design and implementation. Dr. Medved holds a Masters
Degree in Computer Science and Economics and a Ph.D. in Computer Science.
THEODORE JAY, PATENT COUNSEL TO THE BOARD OF DIRECTORS
Mr. Jay has been an attorney his entire career, having been admitted to practice
before the bar in New York, New Jersey and Connecticut as well as being admitted
to practice as a patent attorney in the United States Patent and Trademark
Office. In 1946 he became a member of the patent department for GTE and was
25
promoted successively from the position of Patent Attorney for the Research
Laboratories to a Counsel for Telephone and Electronic Systems. During his
tenure with GTE Mr. Jay led negotiations in concluding world-wide patent cross
licenses with General Electric, AT&T and other major corporations as well as
directing various types of patent and trademark litigation. During his
employment with GTE Mr. Jay prepared and filed over 300 patent applications in
various electronic, mechanical and chemical fields. In 1987 Mr. Jay accepted
early retirement from GTE and established his present independent practice
providing patent, copyright and Science Degree in General Engineering from the
Massachusetts Institute of Technology and his Doctorate of Law Degree from New
York University School of Law. Mr. Jay was directly responsible for the
successful completion of Patent Pending Application for FX3000 Proprietary
Internet Currency Trading System.
SHOLIM GINSBURG, STRATEGIC TECHNOLOGY ADVISOR TO THE BOARD OF DIRECTORS
Mr. Ginsburg has over 26 years experience in management and programming in
various fields of data processing and data communications in the banking,
brokerage and engineering industries. Presently, Mr. Ginsburg serves as Vice
President of Citicorp's Global Technology Organization where he manages the
communications software area. Mr. Ginsburg has worked for Citicorp for over 15
years, having been involved with Citicorp's Y2K initiative and having overseen
Citicorp's implementation of some of the first Web enabling technologies and
TCP/IP on mainframe computers and router based communications networks in the
banking industry. Also while at Citicorp, Mr. Ginsburg was in charge of
communications hardware and software strategic planning with responsibilities
for the network design, organization and integration to enhance network
capabilities. Prior to joining Citicorp in 1985, Mr. Ginsburg held a senior
technical position at Prudential Securities and Gibbs & Hills, Inc. Mr. Ginsburg
holds both a Bachelors and Masters Degrees in Mathematics.
KEN R. LEW, SPECIAL ADVISOR TO THE BOARD OF DIRECTORS.
Mr. Lew is a consultant in the merger/acquisition business. Mr. Lew has been an
Officer/Director of a public company since January 2000. He holds an M.B.A. in
Business Finance, a B.Sc. in Cell Biology, and a B.A. in Chemistry from the
University of Washington and Seattle City University. Mr. Lew has produced and
edited two financial books and he has written numerous technical publications.
His education, technical background and experience in business finance provide a
valued source of technical and financial guidance.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Officers, Directors and those beneficially owning more than 10% of small
business Company's class of equity securities registered under Section 12 of the
Exchange Act, shall file reports of ownership and any change in ownership with
the Securities and Exchange Commission. Copies of these reports are to be filed
with the Company.
26
ITEM 10. EXECUTIVE COMPENSATION
The executive officers of the issuer received salaries, benefits and other
compensation during fiscal 2008 of $108,626.43 in the aggregate.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Common Stock ownership of each person and /or
group known by the Company to be the beneficial owner of five percent or more of
the Company's Common Stock, each director individually, and all officers and
directors as a group. Each person has sole voting and investment with respect to
the shares of Common Stock shown, and all ownership is of record and beneficial.
Number of Percent
Name Shares Owned (1) Owned
---- ---------------- -----
Alex Stelmak 4,389,476 24.31%
331 Newman Springs Rd.
Bld. 1, 4Fl. Suite 143,
Red Bank, NJ 07701
Stan Mashov 827,778 4.58%
331 Newman Springs Rd.
Bld. 1, 4Fl. Suite 143,
Red Bank, NJ 07701
Dr. Abel Raskas 4,389,476 24.31%
331 Newman Springs Rd.
Bld. 1, 4Fl. Suite 143,
Red Bank, NJ 07701
Officers & Directors
as a Group (3 Persons) 9,606,730 53.2%
----------
|
(1) Based upon 18,268,104 issued and outstanding.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2008 the Company has been leasing shared office space in New
Jersey for $1,000 per month on a year-to-year lease. In the lease the services
of an administrative assistant and communication services are included.
During fiscal years 2008 and 2007, the Company paid a consulting firm that is
owned by the chief executive officer, $29,488 and $ 106,002 respectively, for
marketing, investor relations, business planning, financial services, and public
relations consulting services.
27
There are no parents of this small business Company.
There are and have been no transactions with promoters.
There were no material underwriting discounts and commissions upon the sale of
securities by the Company where any of the specified persons was or is to be a
principal underwriter or is a controlling person or member of a firm that was or
is to be a principal underwriter.
ITEMS 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
31.1 Certification under Section 302 of the Sarbanes-Oxley Act of
2002 of Chief Executive Officer
31.2 Certification under Section 302 of the Sarbanes-Oxley Act of
2002 of Chief Financial Officer
32 Certification under Section 906 of the Sarbanes-Oxley Act of
2002 of Chief Executive Officer and Chief Financial Officer
|
(b) Reports on Form 8-K
None
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to the Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ADVANCED TECHNOLOGIES GROUP, LTD.
Dated: January 29, 2009 By: /s/ Alex Stelmak
------------------------------------
Alex Stelmak
Chief Executive Officer and Director
Dated: January 29, 2009 By: /s/ Abel Raskas
------------------------------------
Abel Raskas
President and Director
Dated: January 29, 2009 By: /s/ Alex Stelmak
------------------------------------
Alex Stelmak
Chief Financial Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment to the Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Dated: January 29, 2009 By: /s/ Alex Stelmak
------------------------------------
Alex Stelmak
Director
Dated: January 29, 2009 By: /s/ Abel Raskas
------------------------------------
Abel Raskas
Director
Dated: January 29, 2009 By: /s/ Stan Mashov
------------------------------------
Stan Mashov
Director
|
29
DONAHUE ASSOCIATES, L.L.C.
27 BEACH ROAD, SUITE CO5-A
MONMOUTH BEACH, NJ. 07750
Phone: (732) 229-7723
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Advanced Technologies Group, Ltd.
We have completed the audits of the consolidated financial statements of
Advanced Technologies Group, Ltd. (the "Company") and its internal control over
financial reporting as of January 31, 2008 and January 31, 2007 in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes, examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Advanced Technologies Group, Ltd.
(the "Company") at January 31, 2008 and January 31, 2007, and the results of its
operations, cash flows, and changes in shareholders' equity for the years then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the software maintenance contract with Tradition NA, the
Company's sole source of revenue for the last several years, was cancelled by
Tradition in December 2007. Management's plan in regard to this matter is also
discussed in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Donahue Associates LLC.
-----------------------------------
Donahue Associates LLC.
January 29, 2009
Monmouth Beach, New Jersey
|
F-1
Advanced Technologies Group, Ltd.
Consolidated Balance Sheets
As of January 31, 2008 and January 31, 2007
As Restated
2008 2007
------------ ------------
ASSETS
Current assets:
Cash & short term deposits $ 67,287 $ 262,081
------------ ------------
Total current assets $ 67,287 $ 262,081
Other assets:
Fixed assets-net 0 51,457
Investment in FX Direct Dealer 2,407,058 0
Security deposit 45,000 45,000
Trademark-net 7,873 8,479
------------ ------------
Total assets $ 2,527,218 $ 367,017
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 2,934,120 $ 117,030
------------ ------------
Total current liabilities $ 2,934,120 $ 117,030
Shareholder advance 4,600 0
Shareholders' equity:
Series A preferred stock, one share convertible to one share of common; 13%
cumulative non-participating, authorized 1,000,000 shares at
stated value of $3 per share, issued and outstanding 762,081 shares $ 1,712,601 $ 1,712,601
Series B preferred stock, one share convertible to one share of common; 6%
cumulative non-participating, authorized 7,000,000 shares at
stated value of $3 per share, issued and outstanding 1,609,955 shares 4,384,754 4,384,754
Common stock- $.0001 par value, authorized 100,000,000 shares, issued and
outstanding, 18,268,104 at January 31, 2008
and 18,056,673 at January 31, 2007 1,827 1,806
Additional paid in capital 32,664,364 32,639,013
Accumulated deficit (39,175,048) (38,488,187)
------------ ------------
Total shareholders' equity (411,502) 249,987
------------ ------------
Total Liabilities & Shareholders' Equity $ 2,527,218 $ 367,017
============ ============
|
See the notes to the financial statements.
F-2
Advanced Technologies Group, Ltd.
Consolidated Statements of Operations
For the Years Ended January 31, 2008 and January 31, 2007
As Restated
2008 2007
------------ ------------
Revenues:
Revenues from software maintenance $ 919,000 $ 1,306,012
Software maintenance costs (591,000) (793,758)
------------ ------------
Net revenues $ 328,000 $ 512,254
General and administrative expenses:
Salaries and benefits $ 3,160,071 $ 319,076
Promotion & investor relations 37,501 108,398
Consulting 5,594 209,020
General administration 405,646 543,274
Depreciation 19,079 24,594
------------ ------------
Total general & administrative expenses 3,627,891 1,204,362
------------ ------------
Net loss from operations $ (3,299,891) $ (692,108)
Other revenues and expenses:
Gain on investment in FX Direct Dealer 2,407,058 0
Interest income 1,734 8,401
Software consulting 100,000 0
Sub-lease income 129,610 65,370
------------ ------------
Net income (loss) before provision for income taxes $ (661,489) $ (618,337)
Provision for income taxes 0 0
------------ ------------
Net income (loss) $ (661,489) $ (618,337)
============ ============
Loss per common share:
Basic & fully diluted $ (0.04) $ (0.04)
Weighted average of common shares:
Basic & fully diluted 18,085,135 17,646,822
|
See the notes to the financial statements.
F-3
Advanced Technologies Group, Ltd.
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2008 and January 31, 2007
As Restated
2008 2007
----------- -----------
Operating Activities:
Net income (loss) $ (661,489) $ (618,337)
Adjustments to reconcile net loss items
not requiring the use of cash:
Amortization 606 606
Depreciation 19,079 24,594
Salary expense 2,907,740 0
Gain on investment in FX Direct Dealer (2,407,058) 0
Impairment expense 32,377 0
Consulting expense 0 114,249
Changes in other operating assets and liabilities:
Accounts payable (90,650) 22,521
----------- -----------
Net cash used by operations (199,395) (456,367)
Investing Activities:
Purchase of property & equipment 0 (11,962)
----------- -----------
Net cash used by investing activities 0 (11,962)
Financing Activities:
Issuance of preferred stock 0 287,835
Advance from shareholder 4,600 0
----------- -----------
Net cash provided by financing activities 4,600 287,835
----------- -----------
Net decrease in cash during the year (194,795) (180,494)
Cash balance at February 1st 262,081 442,575
----------- -----------
Cash balance at January 31st $ 67,286 $ 262,081
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid during the year $ 0 $ 0
Income taxes paid during the year $ 0 $ 3,251
|
See the notes to the financial statements.
F-4
Advanced Technologies Group, Ltd.
Consolidated Statement of Changes in Shareholders' Equity
From January 31, 2006 to January 31, 2008
(As Restated)
Common Common Preferred Preferred Paid in Accumulated
Shares Par Value Shares Value Capital Deficit Total
------ --------- ------ ----- ------- ------- -----
Balance at January 31, 2006 17,263,140 $1,727 2,594,186 $6,792,926 $31,275,783 $(37,604,196) $ 466,240
Preferred stock issued 101,588 275,643 12,192 287,835
Shares issued for services 216,791 22 114,227 114,249
Preferred converted to common 323,738 32 (323,738) (971,214) 971,182 0
Stock dividend paid 253,004 25 265,629 (265,654) 0
Net loss for the fiscal year (618,337) (618,337)
---------- ------ --------- ---------- ----------- ------------ ---------
Balance at January 31, 2007 18,056,673 $1,806 2,372,036 $6,097,355 $32,639,013 $(38,488,187) $ 249,987
Stock dividend paid 211,431 21 25,351 (25,372) 0
Net income for the fiscal year (661,489) (661,489)
---------- ------ --------- ---------- ----------- ------------ ---------
Balance at January 31, 2008 18,268,104 $1,827 2,372,036 $6,097,355 $32,664,364 $(39,175,048) $(411,502)
========== ====== ========= ========== =========== ============ =========
|
See the notes to the financial statements.
F-5
Advanced Technologies Group, Ltd.
Notes to the Consolidated Financial Statements
For the Years Ended January 31, 2008 and January 31, 2007
(As Restated)
1. ORGANIZATION OF THE COMPANY AND SIGNIFICANT ACCOUNTING PRINCIPLES
Advanced Technologies Group, Ltd. (the Company) was incorporated in the State of
Nevada in February 2000. The Company is the designer of the FX3000, a foreign
currency trading software program. In March 2002, the Company sold the FX3000
software program, for a 25% interest in a joint venture, FX Direct Dealer LLC, a
company that markets the FX3000 software. The Company does not have operational
control over FX Direct Dealer LLC. Tradition NA, the 75% owner of FX Direct
Dealer LLC, is the primary beneficiary.
The Company provides programming service upgrades to the joint venture on the
FX3000. In addition, the Company provides the users of the FX3000 program 24
hour help desk services.
CONSOLIDATION- the accompanying consolidated financial statements include the
accounts of the company and its wholly owned subsidiaries. All significant
inter-company balances have been eliminated.
USE OF ESTIMATES- The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make reasonable estimates and assumptions that affect the reported amounts of
the assets and liabilities and disclosure of contingent assets and liabilities
and the reported amounts of revenues and expenses at the date of the financial
statements and for the period they include. Actual results may differ from these
estimates.
REVENUE RECOGNITION- The Company provides software maintenance and support
services for the users of the FX3000 program. The Company receives a monthly fee
from the joint venture for these services. Revenues received for the maintenance
and support services are recognized by the Company when they are earned.
Under the terms of the agreement, Tradition NA is entitled to a full
reimbursement of its startup costs and initial losses on the joint venture
incurred prior to any revenue payments to the Company. The Company is not liable
for any losses on the joint venture. The Company's interest in the joint venture
is accounted for on a cost basis and adjusted for any net profits of the joint
venture. Profit sharing revenues received from the joint venture are first
applied to the cost of the investment and then to revenues.
The Company has received no profit sharing revenues since its investment in the
joint venture in March 2002.
F-6
CASH AND INTEREST BEARING DEPOSITS- For the purpose of calculating changes in
cash flows, cash includes all cash balances and highly liquid short-term
investments with an original maturity of three months or less.
FIXED ASSETS- Office and computer equipment are stated at cost. Depreciation
expense is computed using the straight-line method over the estimated useful
life of the asset. The following is a summary of the estimated useful lives used
in computing depreciation expense:
Furniture & lease improvements 7 years
Office equipment 3 years
Computer hardware 3 years
Software 3 years
|
Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.
LONG LIVED ASSETS- The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
INCOME TAXES- The Company accounts for income taxes in accordance with the
Statement of Accounting Standards No. 109 (SFAS No. 109), "ACCOUNTING FOR INCOME
TAXES". SFAS No. 109 requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually for differences between financial statement
and income tax bases of assets and liabilities that will result in taxable
income or deductible expenses in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets and liabilities to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period adjusted for
the change during the period in deferred tax assets and liabilities.
RECENT ACCOUNTING PRONOUNCEMENTS:
In July 2006, the FASB issued Interpretation No. 48 ("FIN 48"), "ACCOUNTING TO
UNCERTAINTY IN INCOME TAXES and AN INTERPRETATION OF FASB STATEMENT NO.109." FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS 109. FIN 48 also
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The new FASB standard also provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The provisions of FIN 48 are effective for
the Company's first quarter ending March 31, 2008. The adoption of FIN 48 will
not have a material impact on the financial statements of the Company.
F-7
In September 2006, the FASB issued SFAS No.157, "FAIR VALUE MEASUREMENTS", which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. Earlier application is encouraged provided that the reporting
entity has not yet issued financial statements for that fiscal year including
financial statements for an interim period within that fiscal year. The adoption
of SFAS No. 157 will not have a material impact on the financial statements of
the Company.
In February 2007, the FASB issued SFAS No.159, "THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES"&. The statement permits entities to
choose to measure certain financial assets and liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No.159 is effective as of the beginning
of an entity's fiscal year that begins after November 15, 2007. The adoption of
SFAS No. 159 will not have a material impact on the financial statements of the
Company.
In November 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 109, "WRITTEN LOAN COMMITMENTS RECORDED AT FAIR VALUE THROUGH
EARNINGS." SAB No.109 states that the expected net future cash flows related to
the associated servicing of a loan should be included in the measurements of all
written loan commitments that are accounted for at fair value through earnings.
The provisions of SAB No.109 are applicable to written loan commitments issued
or modified in fiscal quarters beginning after December 15, 2007. The adoption
of SAB No. 159 will not have a material impact on the financial statements of
the Company.
2. GOING CONCERN
The accompanying consolidated financial statements have been presented in
accordance with generally accepted accounting principals, which assume the
continuity of the Company as a going concern. Since the joint venture
agreement's inception in 2002, the Company's sole source of revenues has been
from the software maintenance revenues on the FX3000 software received from the
joint venture. In December 2007, the Company was notified by the majority owner
of the joint venture that the Company would no longer be the maintenance
provider for the software. Consequently, the Company's sole source of revenue
for the prior fiscal years has been lost effective December 2007.
The cessation of the software maintenance revenues associated with the FX3000,
and the Company's continued failure to achieve profitability in the current and
past several fiscal years, raises significant doubt as to the ability of the
Company to continue as a going concern.
F-8
Management's plans with regard to this matter are as follows:
The Company still maintains a 25% equity investment in the FX3000 joint venture
with Tradition NA, although the Company has recognized revenues from this
investment in fiscal 2008, the Company has received no cash payments from this
investment and does not expect to receive cash payments from this investment in
the foreseeable future. The Company currently relies upon shareholder advances
to fund its operations.
Although the existing cash resources are currently expected to provide
sufficient funds through the upcoming year, the continuation of the Company as a
going concern for a period of longer than the upcoming year is dependent upon
the ability of the Company to obtain the necessary financing to continue
operations.
3. NET LOSS PER SHARE
The Company applies SFAS No. 128, EARNINGS PER SHARE to compute net loss per
share. In accordance with SFAS No. 128, basic net loss per share has been
computed based on the weighted average of common shares outstanding during the
years. Diluted net loss per share gives the effect of outstanding common stock
equivalents which are convertible into common stock. The effects on net loss per
share of the common stock equivalents are not included in the calculation of net
loss per share since their inclusion would be anti-dilutive. Net loss per common
share has been computed as follows:
2008 2007
----------- -----------
Net income (loss) $ (661,489) $ (618,337)
Preferred dividends in arrears 0 0
----------- -----------
Income (loss) available to common
shares (Numerator) $ (661,489) $ (618,337)
=========== ===========
Shares outstanding 18,268,104 18,056,673
=========== ===========
Weighted average (Denominator) 18,085,135 17,646,822
=========== ===========
Loss per common share: basic $ (0.04) $ (0.04)
=========== ===========
|
F-9
4. FIXED ASSETS AND IMPAIRMENT EXPENSE
The following table is a summary of net fixed assets:
2008 2007
--------- ---------
Lease Improvements $ 0 $ 31,004
Furniture & Fixtures 0 30,174
Equipment 0 238,382
Accumulated depreciation (0) (248,103)
--------- ---------
Fixed assets- net $ (0) $ 51,457
========= =========
|
As a result of the loss of the software maintenance revenues discussed in Note
2, management decided to impair the balance of the net fixed assets of the
Company at December 31, 2007. As a result, the Company recognized an impairment
expense of $32,277 for this fiscal year.
5. WARRANTS OUTSTANDING
The following table summarizes the details of the number of warrants issued and
outstanding, the weighted average exercise price of the warrants, and weighted
average years remaining on the warrants.
Wgtd Avg
Wgtd Avg Years to
Amount Exercise Price Maturity
------ -------------- --------
Outstanding at January 31, 2006 2,898,158 $5 2.56
Issued 2,122,092
Expired (1,184,560)
Exercised 0
----------
Outstanding at January 31, 2007 3,835,690 $5 2.52
Issued 0
Expired 0
Exercised 0
----------
Outstanding at January 31, 2008 3,835,690 $5 1.52
==========
|
F-10
6. INCOME TAXES
Provision for income taxes is comprised of the following:
2008 2007
----------- -----------
Net loss before provision for income taxes $ (661,489) $ (618,337)
=========== ===========
Current tax expense:
Federal $ 0 $ 0
State 0 0
----------- -----------
Total $ 0 $ 0
Less deferred tax benefit:
Timing differences (3,135,104) (2,566,712)
Allowance for recoverability 3,135,104 2,566,712
----------- -----------
Provision for income taxes $ 0 $ 0
=========== ===========
|
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 34% 34%
Statutory state and local income tax 10% 10%
Less allowance for tax recoverability -34% -44%
--------- ---------
Effective rate 10% 0%
========= =========
|
Deferred income taxes are comprised of the following:
Timing differences $ 3,135,104 $ 2,566,712
Allowance for recoverability (3,135,104) (2,566,712)
----------- -----------
Deferred tax benefit $ 0 $ 0
=========== ===========
|
Note: The deferred tax benefits arising from the timing differences expires in
fiscal years 2027 and 2028 and may not be recoverable upon the purchase of the
Company under current IRS statutes.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and short term deposits, security deposit,
trademark, shareholder advances, and accounts payable and accrued expenses
reported in the consolidated balance sheets are estimated by management to
approximate fair value at January 31, 2008 and January 31, 2007.
8. PREFERRED STOCK
CLASS A PREFERRED STOCK: Class A preferred stock has a stated value of $3 per
share and a cumulative non-participating dividend of 13%. The Class A preferred
stock is convertible into common stock at a conversion ratio of one preferred
share for one common share.
F-11
CLASS B PREFERRED STOCK: Class B preferred stock has a stated value of $3 per
share and a cumulative non-participating dividend of 6%. The Class B preferred
stock is convertible into common stock at a conversion ratio of one preferred
share for one common share.
In fiscal year 2007, the Company issued 101,588 shares of preferred B and
received net proceeds of $287,835.
9. ISSUANCES OF COMMON STOCK
The Company's stock (AVGG) began to freely trade in August 2006.
During fiscal year 2007, the Company issued 216,791 to consultants and
programmers for services rendered.
During fiscal year 2007, the company issued a stock dividend of 253,004 shares
to the preferred stockholders.
During fiscal year 2007, holders of the preferred stock converted 323,738
preferred shares into 323,738 shares of common stock.
During fiscal year 2008, the company issued a stock dividend of 211,431 shares
to the preferred stockholders.
10. RELATED PARTY TRANSACTIONS
During fiscal years 2008 and 2007, the Company paid a consulting firm that is
owned by the chief executive officer, $29,488 and $106,002, respectively, for
marketing, investor relations, business planning, financial services, and public
relations consulting services.
11. COMMITMENTS AND CONTINGENCIES
The Company is committed to a non-cancelable lease for office space in New York
City, expiring in 2012. Future minimum lease payments required under this lease
is as follows:
2008 $ 131,306
2009 135,245
2010 139,302
2011 143,481
2012 24,448
Less sub lease (386,610)
---------
Total $ 187,171
=========
|
F-12
The Company has deposited $45,000 as a security deposit on the office space
described above. The deposit is non-interest bearing and is due at the
termination of the lease.
In August 2006, the Company entered into a sub-leasing agreement with a company
for the bulk of its office space in New York City. The sub-lease expires in
2012.
The firm has executed employment contracts with the president and vice president
of the Company since April 2002. Under the terms of the contracts, the two
officers are to be paid $250,000 per year each, retroactive to April 2002, in
the event the Company receives profit distributions from its 25% investment in
FX Direct Dealer, LLC. Accordingly, the management has accrued a contingent
liability of $2,907,740 in the consolidated balance sheets at January 31, 2008.
F-13
(USOTC:AVGG)
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(USOTC:AVGG)
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